Question

The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed, prepare a CVP income statement through contribution margin.

Answer 1

Answer:

net income = $100000

Explanation:

given data

sales = $900,000

cost of goods = $600,000

operating expenses = $200,000

variable = 70%

fixed = 30%

solution

 CVP income statement

sales =   $900,000

total variable cost = sales - ( cost of good sold ) - (operating expenses )

total variable cost = $900,000  - ( $600,000 × 70% ) - ($200,000 × 70%  )

total variable cost = $560000

and

contribution is $340000

fixed cost = ( cost of good sold ) - (operating expenses )

fixed cost = ( $600,000 × 30% ) - ($200,000 × 30%  )

fixed cost = $240000

so net income is = contribution - fixed cost

net income is = $340000  - $240000

net income = $100000